The NSW economy continues to grow, though at a slower rate than the nation as a whole. There are many factors that influence the NSW economy; the growth is a result of increases in industry contribution to income, strong private business investment, and the increasing price of labour.

ECONOMIC GROWTH

In 2007-08 NSW recorded economic growth of 2.8% to $345.3 billion, as measured by the chain volume estimates of Gross State Product (GSP). GSP growth was slower than national Gross Domestic Product (GDP) growth of 3.7% for the same period. Since 2001-02, NSW GSP growth has been lower than national GDP growth, in part due to the resource boom strongly driving Western Australian and Queensland growth while the benefits for NSW have been more limited.

The Consumer Price Index (CPI) is regarded as Australia’s key measure of inflation. It is designed to provide a general measure of price inflation for the Australian household sector. The CPI measures changes over time in the prices of a wide range of consumer goods and services acquired by Australian metropolitan households.

The all groups Consumer Price Index for Sydney increased by 3.0% in 2007-08, an increase from the previous year (2.7%) but lower than the 3.4% result recorded nationally. The fastest growing expenditure groups in Sydney were the financial and insurance services sector (5.8%), housing (4.7%), health (4.4%) and transportation (4.3%). Household furnishings, supplies and services was the only category to show a decrease (-1.5%).

NSW private business investment increased by 17.1% from 2006-07 to 2007-08 (by $6.7 billion expenditure). Between 2001-02 and 2007-08, NSW private business investment increased from 8.2% to 13.3% as a proportion of chain weighted GSP, to reach an annual $46.1 billion in expenditure. During this period, investment in new machinery and equipment was the main driver of private business investment growth.

In understanding economic growth, it is useful to look at the contributions of different industries to growth in income. Total Factor Income (TFI) represents the value added by factors of production such as labour and capital. It is equivalent to gross domestic product less taxes plus subsidies on production and imports.

From 2002-03 to 2007-08 the total factor income of NSW industries grew in current prices by 6% per annum to $322 billion. Mining continued to have the highest annual compound growth, however, it accounted for only a small contribution (3.3%) to total factor income in NSW in 2007-08. Agriculture, forestry and fishing decreased to $4.3 billion in income (1.3% of TFI in 2007-08). The fall in contribution by Agriculture, forestry and fishing is due to the effects of the recent drought.

TOTAL FACTOR INCOME, By industry(a), NSW: Current prices — 2002-03 to 2007-08

In 2007-08 the largest industry contributors to NSW's Total Factor Income were Property and business services (16%), Finance and insurance (11%) and Manufacturing (11%).

CONTRIBUTION TO TOTAL FACTOR INCOME, By industry, NSW: Current prices — 2007–08

In 2007-08, exports from NSW accounted for 17% of total Australian exports, with a total value of just over $30 billion, while imports into NSW accounted for 38% of total Australian imports, with a total value of nearly $76 billion. The major commodities exports by value were Mineral fuels, mineral oils and products of their distillation, bituminous substances, and mineral waxes ($8.0b) while the major destination of NSW exports by value was Japan ($7.9b). Over the same period, the major commodities imported into NSW, by value, were Machinery and mechanical appliances, boilers, nuclear reactors, and parts thereof ($12.5b). The major countries of origin of imports into NSW were China ($15.1b), the United States of America ($9.6b) and Japan ($6.4b).

From 2006-07 to 2007-08, the value of the NSW international trade deficit increased by 9.9% ($4.1 billion) to $45.9 billion. The increase was the result of imports growth (8.8% or $6.1 billion) exceeding exports growth (7.1% or $2.0 billion).

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